tăng trưởng tín dụng ngân hàng đối với doanh nghiệp nhỏ và vừa ở việt nam trong điều kiện kinh tế vĩ mô bất ổn bản tóm tắt tiếng anh

STATE BANK OF VIETNAM

MINISTRY OF EDUCATION
AND TRAINING

BANKING ACADEMY OF VIETNAM





NGUYEN VAN LE




BANK CREDIT TO SMALL AND MEDIUM
ENTERPRISES IN THE VIETNAMESE
UNSTABLE MACROECONOMY




MAJOR: FINANCE - BANKING
CODE: 62.34.02.01




SUMMARY OF ECONOMIC PHD DISSERTATION

HANOI, 2014
THE DISSERTATION COMPLETED AT
BANKING ACADEMY OF VIETNAM


Academic Supervisors:
1. ASSOC.PROF.DR. TO NGOC HUNG
Banking Academy of Vietnam
2. DR. DAO MINH PHUC
State bank of Vietnam


Reviewer 1: Assoc.Prof.Dr. Tran Thi Ha
State Council for Professor Title

Reviewer 2: Assoc.Prof.Dr. Nguyen Huu Tai
National Economics University


The dissertation will be defended at University level Council of
Dissertation Assessment at Banking Academy of Vietnam
Time: ………… date …… month …… year 2014

The dissertation could be found at:
- Library of Banking Academy of Vietnam

- Vietnamese National Library
1

INTRODUCTION

1. Significance of the research
In every country, small and medium enterprises (SMEs) always play an
important part in the socio-economic development of the country, and
Vietnam is not an exception. Recently, SMEs in Vietnam have ascertained
their positions in the national economy as they account for 98% of the total
number of nationwide enterprises, being the vital drive to create new jobs,
mobilize social resourses for development investments, contributing to the
cause of poverty elimination and poverty reduction in local provinces as well
as actively supporting the development of other economic players in the
economy.
As for the development of SMEs, bank credit has an undebatably
important role, especially as the Vietnamese economy is a bank-based
market. Aware of this fact and the potential of SMEs, commercial banks
have increasingly paid more attention to provide credit to this segment of
enterprises. However, because of their peculiarities in terms of size and
busisness activities, SMEs often experience some difficulties in gaining
access to credit from commercial banks. In addition, the instabilities of the
global economy and the inherent weaknesses of the domestic economy have
badly impacted on the business environment of SMEs in Vietnam since
2008. The rising inflation and interest rates accompanied by falling aggregate
demand have caused a big number of Vietnamese SMEs to run into
difficulty, shrink their business activities, or even stop doing business and go
bankrupt. Consequently, SMEs are faced with more difficulties in getting
bank credit to recover their affected business activities due to the negative
impacts of the unstable macroeconomy. At the same time, the deeper

integration into the global economy of the Vietnamese economy has imposed
some opportunites and threats on both SMEs and bank service providers to
adapt to the new economic playground.
That is the reason that I have chosen “Bank credit to SMEs in the
Vietnamese unstable macroeconomy” as the topic of my dissertation with a
view to promoting bank credit to SMEs. The dissertation shall provide the
theoretical framework of, current situations of, and solutions to promote bank
credit to SMEs, partly creating the solid foundation of the sustainable
development of this segment of enterprises in the context of the current
current challenging business environment in Vietnam.
2

2. Literature review
2.1. Foreign researches
A number of research papers on bank credit to SMEs have been done
worldwide. They have provided quite standard theories about bank credit to
SMEs in various respects such as credit products, effects of bank credit, the
dependence of SMEs on bank credit, etc in different economic conditions.
2.2. Domestic researches
The operation of the Vietnamese SMEs in general and credit to this
kind of enterprises in the unstable macroeconomy have been receiving a lot
of concern in recent articles and research papers. However, these researches
have for the most part analysed in very narrow scope of research or a certain
aspect of business activities, and not focused on a comprehensive set of
relating issues of bank credit to SMEs.
3. Research Objective
3.1. In theory: (i) To provide systematically theoretical framework of bank
credit to SMEs in unstable macroeconomy, and (ii) To draw the most valuable
and suitable lessons for bank credit to SMEs in Vietnam from international
experiences.

3.2. In practice: (i) To analyse the environment for bank credit to SMEs in
the unstable macroeconomy of Vietnam; (ii) To analyse and evaluate
comprehensively the bank credit to SMEs in the unstable macroeconomy of
Vietnam; (iii) To propose some solutions and recommendations to promote
bank credit to SMEs in the unstable macroeconomy of Vietnam.
4. Subjects and scope of the research
The dissertation focuses on bank credit to SMEs in the unstable
macroeconomy of Vietnam from 2008 to 2013, the period in which the banking
activities in general and bank credit to SMEs in particular were suffered from
remarkable impacts of the domestic macroeconomic instabilities.
5. Research methodology
In addition to the methods of dialectical philosophy and historical
materialism which are usually used in doing research in general, a complete
set of methods of statistics, comparision, analysis, generalization, deduction,
induction, and illustration by tables and charts are used to make the
dissertation more scientifically convincing. An econometric model is also
regressed to prove the hypotheses about bank credit to SMEs.
6. Contributions of Dissertation
In terms of theory, the dissertation has systematically approached
3

issues relating to growth of bank credit to SMEs in challenging macroenomic
environment.
In terms of practice, the dissertation has made use of an econometric
model to conduct an insightful analysis of the ability to promote bank credit
to SMEs in the context of unstable macroeconomy of Vietnam, consequently
providing the most suitable solutions to the current situtations in Vietnam.
The results show that SMEs has had to face substantial financial risks
because of their decreasing profits accompanied by increasing interest
expenses in the unstable macroeconomy of Vietnam.

7. Chapter Layout of Dissertation
Besides the introduction, conclusion, and references, the dissertation is
organized in three chapters as follows:
Chapter 1: Theory of growth of bank credit to SMEs in unstable
macroeconomy
Chapter 2: Growth of bank credit to SMEs in the unstable
macroeconomy of Vietnam
Chapter 3: Solutions and recommendations to promote bank credit to
SMEs in the unstable macroeconomy of Vietnam.

4

Chapter 1
THEORY OF GROWTH OF BANK CREDIT TO SMEs
IN UNSTABLE MACROECONOMY

1.1. BANK CREDIT TO SMES
1.1.1. SMEs and their role in economy
1.1.1.1.
The concept of SMEs
Table 1.1: Enterprise classification

Microenterprises
Small enterprises
Medium enterprises
Number of
employees
Total
capital
Number of

employees
Total capital
Number of
employees
I- Agro-
forestry and
seafood
≤ 10
≤ 20 billion
VND
>10
≤ 200
> 20 billion
VND
≤ 100 billion
VND
> 200
≤ 300
II- Industry
and
construction
≤ 10
≤ 20 billion
VND
>10
≤ 200
> 20 billion
VND
≤ 100 billion
VND

> 200
≤ 300
III- Trade
and services
≤ 10
≤ 10 billion
VND
>10
≤ 50
>10 billion
VND
≤ 50 billion
VND
> 50
≤ 100
Source: Decree No. 56/2009/NĐ-CP
1.1.1.2.
Characteristics of small and medium enterprises
These are main characteristics of SMEs: (i) small scale of operations and
financial potential; (ii) varied kinds of enterprises, industries and business
sectors; (iii) inefficient business strategy, limited scientific and technical
qualifications and weak competitiveness; (iv) heavily dependent on the change
of business environment; (v) simplify and highly flexible management system,
but low managerial competency.
1.1.1.3.
The role of SMEs to economy
SMEs play a vital role in the economic growth and in consider as an
indispensable part of the economy of each country. Their mission includes:
(i) creating jobs and reducing the rate of unemployment; stablizing and
stimulating economic growth; (iii) allocating and developing local resources

to restructure the economy; and (iv) increasing economic flexibility.
1.1.2. Bank credit to SMEs
1.1.2.1.
The concept of bank credit to SMEs
Bank credit to SMEs can be defined as the agreement between banks
5

and SMEs: banks transfer assets to SMEs through discount loans,
underwriting, financial leasing, and other kinds of credit granting; then, SMEs
use these assets based on the principle of reimbursement.
1.1.2.2.
Types of bank credit to SMEs: (i) Based on the form of credit
granting: loans, discount, rediscount, bank guarantee, factoring, leasing; (ii)
Based on credit duration: short-term credit, medium and long-term credit;
(iii) Based on credit guarantee: secured loans and unsecured loans.
1.1.2.3.
The role of bank credit to SMEs: (i) stimulating the reproduction
progress, (ii) improving the productivity of capital; (iii) setting optimal
capital structure for SMEs; (iv) and increasing the competitivity of SMEs.
1.2. FUNDAMENTAL CONTENT OF GROWTH OF BANK CREDIT
TO SMES IN THE MACROECONOMIC CONDITIONS OF
UNCERTAINTY
1.2.1. Principle of the unstable macroeconomy
The unstable macroeconomy is reflected through negative changes of
the most basic variables, including inflation, growth indicator, rate of
unemployment and public debt. In particular, these negative changes usually
lasts for at least two years with extreme and continuous intensity.
1.2.2. Growth of bank credit to SMEs in the macroeconomic conditions
of uncertainty
1.2.2.1.

Concept of growth of bank credit to SMEs in the macroeconomic
conditions of uncertainty
The bank credit growth to SMEs in the unstable macroeconomy is a
number of activities of banks to increase credit for SMEs in the attempt of
satisfying the customer demand while the economy have signs of
instability including: inflation, rate of unemployment, growth indicators
and public debt.
1.2.2.2.
Bank credit accessbility of SMEs in the macroeconomic conditions
of uncertainty
The bank credit acessibility of SMEs is fairly low because of their
peculiarities in terms of size and busisness activities especially in the period
of unstable macroeconomy.
1.2.2.3.
The necessary of credit grwoth to SMEs in the macroeconomic
conditions of uncertainty
The unstable macroeconomy could make SMEs more vulnerable and
an enormous number of enterprises fall into depression, loss, even
bankruptcy. In this context, credit growth to SMEs is not only protecting
6

these enterprises from bankruptcy but also creating jobs, stimualting
production activities and stablizing macroeconomy. Furthermore, growth of
bank credit in the unstable macroeconomy helps commercial banks to
broaden their market and increase their profit.
1.2.2.4.
The criteria of credit growth to SMEs in the unstable
macroeconomy
* Criteria of credit balance to SMEs, including: The increase in credit
to SMEs; Growth rate of credit to SMEs; Proportion of credit to SMEs.

* Criteria of credit structure to SMEs, including: credit balance based
on form of credit; credit balance based on types of enterprises; credit balance
based on industries.
* Criteria of credit quality to SMEs: overdue loans to SMEs; Ratio of
overdue loans to SMEs to Total lending to SMEs; NPL to SMEs; Ratio of
NPL to SMEs to Total lending to SMEs.
1.2.3. Factors affect bank credit growth to SMEs
1.2.3.1.
The factors derived from banks: the credit policies of banks,capital
mobilization capacity, human resources, credit information, credit process,
credit risk management capacity.
1.2.3.2.
The factors of economic, legal and social context: Economic factor,
social factor, legal factor.
1.2.3.3.
The factors derived from SMEs: financial ability, managerial
competency, development strategy, knowledge and information about
bank credit.
1.3. INTERNATIONAL EXPERIENCES IN GROWTH OF BANK
CREDIT TO SMES IN THE UNSTABLE MACROECONOMY AND
LESSIONS FOR VIETNAM
In this part, the dissertation presents the experience in stimulating
growth of bank credit to SMEs, especially after the effects of crisis in several
countries including Taiwan, Korea and Ireland which provide lessons for
Vietnam Government and banks.
1.3.1. Experiences of several countries
1.3.2. Lessons for Vietnam
The dissertation draws some lessons for Vietnam, which are these
following:
* For State administrative organs: (i) Vietnam Government can

coorporate with commercial banks to set up a framework for measuring,
ranking and garanteeing SMEs which facilitate the access of bank capital in
7

the current unstable macroeconomy (ii) Government and State administrative
organs have to make connection between banks and enterprises, especially
SMEs in the lending process as well as assure the operational security for the
whole banking system; (iii) Government should stimulate the development of
capital market in order to encourage SMEs to raise capital through issuing
shares, stocks and via investmend funds, reduce the denpendence on bank
credit; (iv) Along with financial assistance, government have to
synchronously, flexibly and effectively implement a wide range of solutions
to technology, human resources, market and product quality in order to
encourage the development of SMEs.
* For commercial banks: (i) diversifying the form of credit granting
by designing suitable product packages for different enterprises in different
economic circumstances; (ii) In lending process, banks should frequently
keep contact with customers in order to draw exact conclusion and avoid
credit risks; (iii) proactively preventing risks from customers by using a wide
range of solutions such as assisting, consulting for SMEs in improving
financial management ability; (iv) collaborate with SME Association,
industry associations và local SME development fund to take advantages of
these organs and expand customer network.



8

Chapter 2
GROWTH OF BANK CREDIT TO SMEs

IN THE UNSTABLE MACROECONOMY OF VIETNAM

2.1. GROWTH ENVIROMENT FOR BANK CREDIT FOR SMES IN
VIETNAM IN UNSTABLE MACROECONOMY
2.1.1. The unstable macroeconomicbackground
In the global economic crisis, Vietnam’s economy faced many
instabilities, such as slow growth in quantity, low growth in quality;
fluctuatedand potentially higher inflation; despite an improvement, trade
balance was in deficitand instability; total of investment sharply dropped
because of unfavorable investment environment and pessimistic outlook of
the economy as far as other developing countries. In spite of the fact that the
government has madeto supportproduction, resolve difficulties, the results is
preliminary. The weakness in financial capacity, the ability producing goods
and competingneed a long time to be able to overcome. This situation implies
that businesses, especially SMEs having a high sensitivity to the economic
cycle will face many difficulties in maintaining their business.
2.1.2. Impact ofthe unstable macroeconomic background on SMEs
activities
For the business environment in Vietnam, the world economic crisis
impacts considerably on SMEs, as well as banking services for these
businesses. The number of businesses, most of which are SMEs, dissolved or
deactivated increased. Whereas, businesses start entering also cautiously in
theunstable macroeconomic situation.The businesses currently exists also
faced difficulties in declining revenues and profits. They produced
moderately, focused on resolving inventory instead of investing to expand
production are common. This situation impacts negatively on credit growth,
especially credit for SMEs.
2.1.3. The situation of SMEs raise capital in the macroeconomic
conditions of uncertainty
The macroeconomic instability from 2008 up to now has greatly

influenced the ability to access capital to maintain and expand production
and business activities of SMEs. There are many characteristics and
difficulties in accessing and raising capital of SMEs. Firstly, appropriated
funds from partners, customers, tax debt in SMEs account for a large
proportion. Secondly, SMEs is difficult to access to the borrowing funds,
9

particularly borrowing from the banking system. In the third place, the equity
having by issuing bonds and shares is very low in total capital. Finally,
returnonly meetspartially the investment needs of SMEs.
Therefore, raising capital of SMEs in Vietnam has been difficult in
recent years. The channels for capital mobilization have not made stable and
sustainable to meet the needs of SMEs for production and business activities.
Moreover, unreasonablenessin SMEs’ capital structure also makes it to do
not take advantage of debt to increase corporate value.
2.1.4. The government’s policies to growth bank credit for SMEs in the
macroeconomic conditions of uncertainty
2.1.4.1.
The general policies to support for SMEs
In recent years, the macroeconomic instability has made the operating
environment for SMEs worse, which has leaded to the difficulties in the
business operations of these enterprises. Recognizing the importance of
SMEs in the economy, the government has issued many policies to support
enterprises in general and SMEs in particular.
2.1.4.2.
The mechanisms and policies of bank credit for SMEs
The implementation of a Decision No. 1231 / QD-TTgin 09/07/2012 of
Prime Minister on SMEs Development Plan from 2011 to 2015, State Bank
of Vietnam cooperated with otherconcerned ministries building and issuing
documents and policies to encourage banks to expand credit to SMEs for

removing difficulties in operating capital for SMEs.
2.1.4.2.1. The ordinary commercial credit policies
2.1.4.2.2. The policy of interest
2.1.4.2.3. The foreign exchange policy
2.1.4.2.4. The specific credit policies apply for SMEs: (1) The policies relate
to underwriting activities (including guarantees of Development Bank to
borrow from the commercial bank and through credit guarantee Fund for
SMEs), (2) the specific credit policies for SMEs (in the field of agriculture,
in disadvantaged areas and in investment, exportssectors).
2.1.4.3.
The other solutions of the SBV to support credit growth for SMEs
In the period between 2011 and now, the most recent is from 2013, the
State Bank of Vietnam has actively implemented solutions operating
monetary policy, credit policy, that not only controlled inflation, but
contributed to unfreeze credit for removing difficulties for production and
business activities of enterprises in general and SMEs in particular.
10

2.2. CURRENT SITUATION OF BANK CREDIT GROWTH OF SMES
IN UNSTABLE MACROECONOMIC CONDITIONS
2.2.1. Overall evaluation on services provided for SMEs:
Table 2.1: Assessment on providing capabilities of banking services:
(scale from 1 to 5)
Categories
Average
categories
score
Northern
region
Middle

region
Southern
region
State-
owned
commercial
bank
Joint-stock
commercial
bank
Capital
mobilization
service
3.53
3.54
3.31
3.55
3.44
3.65
Credit facilities
3.58
3.47
3.30
3.69
3.56
3.60
Payment service
3.47
3.47
3.46

3.47
3.47
3.52
Investment
service
2.92
2.91
2.82
2.95
3.09
2.90
Guaranteed
service
3.25
3.26
3.13
3.31
3.19
3.16
Foreign
Exchange service
3.11
3.15
2.84
3.20
3.16
3.11
Newly developed
service
2.90

2.92
2.74
2.97
2.87
3.06
Average service
score
3.25
3.25
3.09
3.31
3.25
3.29
Source: Institute of Financial Sciences
Together with the expansion of Vietnam commercial banking system,
banking services are becoming well-diversified with increasing quality. This
development has created a positive effect on the ability to approach and
consume banking services of SMEs. However, from an objective perspective,
services provided by commercial banks in Vietnam have just started in
asymptotic point compared with traditional services offered by foreign
banks. The main profit source for commercial banks in Vietnam mostly come
from credit facilities. Other services such as guaranteed transactions, leasing,
co-financing contribute modestly to the total income, while the
diversification process of other modern services is still at low rate. Payment
services still expand at slow pace due to the incomplete modernization of
11

payment system and facilities, therefore cash transactions still account for
high proportion in total. Other payments are still not highly recommended
because of their inconvenience, lack of flexibility and safety. Besides, other

advanced services like underwriting or trust are still at the initial phase. In
such condition, the ability to approach and use advanced banking services of
SMEs is certainly limited.
2.2.2. Facts about the improvement of credit facilities provided for
SMEs:
2.2.2.1.
The size of credit
a. The expansion of credit and increase in outstanding debts
The number of SMEs with outstanding debts is experiencing a decrease
tendency, especially in the first 9 months of 2013, this number has downed
by 80% compared to the previous year. Total outstanding debts belonged to
those firms have witnessed a gradual decrease in contribution to total debts in
the economy over the last 3 years, from 21,68% in 2011 to 19, 29% after the
first 9 months of 2013, suggesting that the credit expansion for service firms
is at a slower rate compared to that of the whole economy.
b. Outstanding debts proportion owed by service firms
SMEs are currently accounting for 20% to 27% total debts in
commercial banks, with a gradual down since 2009. At the end of September
2013, outstanding debts owed by those firms remain at 19.29% of total debts,
expected to rise in both amount and proportion in the future.
2.2.2.2.
Credit structure
a. Credit balance by legal forms
SMEs requiring loans from the banks include joint-stock companies,
state-owned businesses, limited companies, and sole proprietorships.

Figure 2.8: Credit balance by legal forms
Source: Author’s surveys in some of Commercial Banks
12

b. Credit balance by industries

Figure 2.9: Credit balance by industries
Source: Commercial Bank reports
c. Credit balance by terms and currencies
SMEs prefer short-term loans for their activities, with the outstanding
short-term debts have increased from 65% in 2011 to 67% in 2013. On the
other hand, medium and long-term debts have experienced a decrease over
those 3 years.
Loans in domestic currency have remained stable, with 85% of lending
offers are made in Vietnamese dong.
d. Credit balance by lending forms
SMEs prioritize lending services based on credit limit, on times and on
investment projects. Other products like factoring, discount, installment loan,
underwriting still contribute inconsiderably to total credit owed by those
firms. They haven’t still acknowledged much about the services available
and suitable for their activities.
2.2.2.3.
Credit quality
Overdue debts, bad debts and mortgaged assets value of SMEs
continuously increased since 2011, with a highest rise in 2012 and a slower
rate in 2013.
Table 2.7: Non performing loans proportion of SMEs

2008
2009
2010
2011
2012
After 9

months of
2013
Over outstanding debts
24.55%
26.34%
23.15%
21.68%
20.82%
19.29%
Bad debts/ Credit debts
2.06%
1.90%
2.21%
3.10%
4.20%
4.58%
Bad debts owed by
SMEs/ Total credit
offered to SMEs
1.13%
1.59%
1.97%
3.9%
5.00%
5.2%
Sources: Annual report of The State Bank of Vietnam
13

2.2.3. Solutions to stimulate credit growth in current economic status
Nowadays, with such unstable macroeconomic conditions, many banks

have actively shown their support toward SMEs through their adjustment in
services provided, such as changing installment period, strengthening the
relationships between firms and banks, cutting down interest rate, expanding
credit period. Other banks have tried different approach like offering attached
convenience with existing services, together with prioritized interest rate and
modern payment services. These methods are only temporary, however they
demonstrate the flexibility of commercial banks in offering services,
therefore contribute to diversify existing services and bring them closer to
actual needs of SMEs.
Together with the consolidation of traditional services such as lending,
banks are progressively developing other modern services including
factoring, underwriting or leasing. Moreover, other programs such as Loans
for SMEs in Rural & Remote areas, Loans for Commercial Activities in
Border areas are also being proceeded.
2.2.4. Empirical study on SME credit growth under unstable economic
condition
2.2.4.1.
Sample method and data collection
Author collected data from 109 SME, which are current customers of
Vietnamese commercial banks in 2010 and 2011. The sampling method is
random from customer database of Vietnames commercial banks that have
current credit, deposit, and transaction relationship.

Figure 2.10: Sample classification by industry
Source: Calculated by author
Table 2.8: Sample classification by funding size
Funding size
Year 2010
Year 2011
0 - 10 billion

36.76%
32.35%
10-20 billion
22.06%
20.59%
20-50 billion
19.12%
20.59%
50-100 billion
22.06%
25.00%
Source: Calculated by author
14

2.2.4.2.
Credit growth of SME in sample

Figure 2.1: Short term loan over total
fund of SME

Figure 2.2: Long term loan over
total fund of SME

Figure 2.13: Total loan over total fund
of SME

Figure 2.14: Total liability over
total fund of SME
Source: Calculated by author
On average, SME in sample borrow short term loan less than 15% of

total fund. In 2011, this ratio increased slightly in comparison with 2010,
from 13,8% to 14,2%.
SME tend to borrow short term loan rather than long term one,
reflecting the Vietnamese structure of money and capital market (the capital
market for issuing bonds has not developed well).
Bank loan over total fund of SME in sample increased in 2011. This
phenomenon occurred in information technology, industrial goods, food and
beverage, construction material, and medical industries.
The fact that short term liability proportion is high but credit from bank
ratio is low indicates that SME faced difficulties in obtaining credit from
banks. However, in the future, this a potential for banking industry as SME
shift from other funding sources to bank loan.
2.2.4.3.
Factors affecting bank loan ratio of SME in unstable economic
condition
2.2.4.3.1. Hypotheses on factors affecting bank loan ratio of SME
Author proposes seven different hypotheses on credit growth of SME
as follow:
15

Hypothesis 1: there is a positive relationship between credit growth
and size of enterprise
Hypothesis 2: there is a positive relationship between credit growth
and proportion of tangible assets of enterprise
Hypothesis 3: there is a negative relationship between credit growth
and non-depreciation shield of enterprise
Hypothesis 4: there is a positive or negative relationship between
credit growth and profitablity of enterprise
Hypothesis 5: there is a positive relationship between credit growth
and liquidity of enterprise

Hypothesis 6: there is different relationship between credit growth and
industry of enterprise
Hypothesis 7: there is different credit growth rate between stable and
unstable economic condition
2.2.4.3.2. Model measuring factors affecting bank loan of SME
To check above hypothese, author employs ordinary least square
method to regress the following model:
LOAN
i
=β
0
+ β
1
×SIZE
i
+ β
2
×TANG
i
+ β
3
×DEPR
i
+ β
4
×ROA
i
+ β5×LIQ
i
+

β6×DUM1
i
+ β
7
×DUM2
i
+ β
8
×DUM3
i
+ β
9
×DUM4
i
+ β
10
×DUM5
i
+
β
11
×DUM6
i
+𝜀
i

In which: Loan is ratio of bank loan over total fund; Size is natural
logarithm of total assets; Tang is ratio of tangible assets over total assets;
DEPR is non-debt tax shield, measured by dividing accumulated depreciation
by historical cost of fixed assets; ROA is return on assets; LIQUID is

liquidity of enterprises, measured by current ratio; DUM1, DUM2, DUM3,
DUM4, DUM5, DUM6 is industry dummy variables for information
technology, consumable goods, industrial goods, energy, food and beverage,
construction material; and 𝜀 is error term.
Author divides observations in two parts with assumption that the
economy in 2010 was stable while in 2011, the economy was unstable. By
using this method, author can evaluate the factors affecting ratio of bank loan
over total fund of SME in two different periods.
Hypothesis 1: there is a positive relationship between credit growth
and size of enterprise
Hypothesis 2: there is a positive relationship between credit growth
and proportion of tangible assets of enterprise
Hypothesis 3: there is a negative relationship between credit growth
and non-debt tax shield of enterprise
16

Hypothesis 4: there is a positive or negative relationship between
credit growth and profitablity of enterprise
Hypothesis 5: there is a positive relationship between credit growth
and liquidity of enterprise
Hypothesis 6: there is different relationship between credit growth and
industry of enterprise
Hypothesis 7: there is different credit growth rate between stable and
unstable economic condition
Table 2.9: Summary of hypothese and expected sign
of independent variables

Hypothese
Independent
variables

Expected
size
H
1
A positive relationship between credit growth and
size of enterprise
SIZE
+
H
2
A positive or negative relationship between credit
growth and profitablity of enterprise
PROFIT
+/-
H
3
A positive relationship between credit growth and
proportion of tangible assets of enterprise
TANGI
+
H
4
A positive relationship between credit growth and
liquidity of enterprise
LIQUID
-
H
5
A negative relationship between credit growth and
non-debt tax shield of enterprise

NDTS
-
H
6
Different relationship between credit growth and
industry of enterprise
DUM
+/-
Source: Summarized by author
2.2.4.3.3. Results of model measuring factors affecting bank loan of SME
Model result is shown in table 2.10.
The statiscal significance of independent variables:
The regression result shows that asset size, non-debt tax shiled, and
liquidity have clear impact on bank loan of SME in 2010. In 2011, only asset size
and liquidity are varibles affecting bank loan of SME. Similarly, industry dummy
varibles such as information and techonology, consumable goods, energy and
construction material industries are statistically different. However, in 2011,
there was no such difference, except energy industry.
Table 2.10: Regression results in 2010 and 2011
Year 2010
Year 2011
Variable
Coefficient
t-stat
p-value
Biến
Variable
Coefficient
t-stat
SIZE

0.0251
5.0733
***
SIZE
0.0171
3.4855
***
TANG
-0.0541
-0.4255

TANG
0.1096
0.8021

17

DEPR
-0.2358
-3.0347
***
DEPR
-0.1342
-1.5373

ROA
-0.1931
-0.6825

ROA

-0.0510
-0.1552

LIQ
-0.0257
-3.6825
***
LIQ
-0.0224
-2.3781
**
DUM1
-0.3221
-2.6908
***
DUM1
-0.2038
-1.5066

DUM2
-0.3409
-2.8086
***
DUM2
-0.2055
-1.5467

DUM3
-0.1120
-0.9908

DUM3
-0.0633
-0.5066

DUM4
-0.3942
-2.6865
***
DUM4
-0.2846
-1.7400
*
DUM5
0.0822
0.6613

DUM5
0.1731
1.2317

DUM6
-0.3737
-3.4470
***
DUM6
-0.1987
-1.6495

Source: Calculated by author

Coefficient sign of variable:
In 2010, coefficient’s signs and statistical significance confirm
hypothese H1, H2, H4, H5, H6 and reject H2. In 2011, H1, H4, H5 are
accpected while H2 and H3 are rejected.
Size of coefficients:
In 2011, SME who expanded firm size did limit loan from bank and
relied on owner’s contribution. The coefficient of size decreases from 0,0251
to 0,0171 while the coefficient of profitability goes down from 0,1931 to
0,051. In unstable economic condition, high cost of bank loan and low
profitability force SME to depend on internal funds. Bank are more cautious
when appraising financial capacity of customers.
Fixed asset coefficient increases from 0,0541 to 0,1096, indicating that
banks pay more attention on value of fixed assets as collateral for the loan.
Non-debt tax shield does not have impact on bank loan in case of
unstable economic condition. Similarly, the difference in bank loan between
different industries does not exist as the high correlation between industries.
Credit from the bank has a negative relationship with enterprise
profitability but at a lower level. However, taking advantage of bank loan
brings more benefits for enterprises than other non-interest bearing liabilities.
Table 2.11: The relationship between debt, bank loan ratio and
enterprise profitability in 2010 and 2011

Total
liabilities
Short-term
liabilities
Long-term
liabilities
Short-term
loan

Long-term
loan
ROA 2010
-0.2876
-0.2394
-0.1285
-0.0819
-0.0716
ROA 2011
-0.3802
-0.3645
-0.0648
-0.0023
-0.0195
ROE 2010
0.2157
0.1725
0.1040
0.2075
0.1555
ROE 2011
-0.0043
-0.0667
0.1003
0.1633
0.1075
Source: Calculated by author
18

2.3. GENERAL ASSESSMENT ON CREDIT GROWTH TO SMES IN

THE UNSTABLE MACROECONOMY
2.3.1. Achievements
Firstly, credit services for SMEs have brought benefits to commercial
banks.
Secondly, many banks concentrated on developing credit services for
SMEs.
Thirdly, credit structure for SMEs has been positively changed which
leads to the improvement of bank credit growth to SMEs.
Forthly, the banks significantly altered their credit policies towards
SMEs and implemented various preferential loan packages to SMEs.
Fifthly, the banks established their own customer policies for SMEs
lending which partially remove the diffenrence between industries, SMEs
and big enterprises.
Sixthly, besides domestic capital, the banks actively seek for fund from
international financial institutions and NGOs in order to obtain capital loans
with low interest rates to reduce lending cost for SMEs.
Seventhly, accompanied services of credit activities to SMEs have
been more convenient to build trust and close relationship between banks
and SMEs.
Eighthly, Vietnamese commercial banks start to pay attention to boost
modernization, apply science technology advances in exploiting retail
market, enhance assess to individual customers and SMEs.
2.3.2. Disadvantages and causes
2.3.2.1.
Disadvantages
Firstly, NPL ratio of SMEs at commercial banks is always higher than
NPL ratio of other kinds of customers.
Secondly, the process of credit restructuring to SMEs based on
industries is still low.
Thirdly, financial ability of the Vietnamese commercial banks are low,

although most of them meet the standard of charter capital (VND 3.000
billion).
Fouthly, there are some similarities in development approaches of
commercial banks to credit products for SMEs.
Fifthly, the collaboration among commercial banks in exercising new
banking services is still ineffective.

19

2.3.2.2.
Causes of disadvantages
Causes from SMEs
- SMEs are the most vulnerable customers which could be easilly
reduced in operating scale, even be faced the risk of bankruptcy in the
unstable macroeconomy. This leads to the difficulty of credit activities to
SMEs both in credit growth and credit quality.
- Weaknesses in internal financial management of SMEs
Causes from commercial banks
- The banks have not established an overall strategy for SME credit
growth yet.
- Credit process of the banks are not specific to SMEs.
- Credit programs designed for SMEs are not suitable for the
characteristics of SMEs.
- The promotion of commercial banks about modern banking services
does not attract customers.
- The new product design and introduction is limited.
- Risk management ability of commercial banks towards SMEs is
incompetent.
20

Chapter 3
SOLUTIONS AND RECOMMENDATIONS
TO PROMOTE BANK CREDIT TO SMEs
IN THE VIETNAMESE UNSTABLE MACROECONOMY

Chapter 3 of the dissertation presents three main issues including
guidelines on bank credit to SMEs in Vietnam in the years to come, solutions
to promote bank credit to SMEs in the Vietnamese unstable macroeconomy,
and some accompanied recommendations.
The guidelines on bank credit to SMEs in Vietnam in the upcoming
years are determined based on the guidelines on the development of
Vietnamese SMEs, on bank credit to SMEs in the context of unstable
macroeconomy, and on bank credit to SMEs from the State Bank of Vietnam
and Vietnamese commercial banks.
Based on these above mentioned guidelines and the drawbacks which
are pointed out in Chapter 2, this chapter provides a set of solutions
comprised of two main groups: (i) Strategic solutions and (ii) Specific
solutions to promote bank credit to SMEs in the unstable macroeconomy
of Vietnam.
The strategic solutions include (i) the development of the process of
providing bank credit to SMEs, (ii) the tools to implement the strategy to
promote bank credit to SMEs, and (iii) the evaluation of capital absorption of
SMEs in the Vietnamese unstable macroeconomy.
The specific solutions inlude (i) the preparation of capital to meed the
borrowing needs of SMEs, (ii) the development of suitable credit policy for
SMEs, (iii) the development of standardized process of providing bank credit to
SMEs, (iv) the quality-approached bank credit to SMEs, (v) the implementation
of good customer policy to attract SMEs; (vi) the establishment of marketing
campaigns to polish the brand images of commercial banks, (vii) the
determination of potential SMEs for commercial Banks, (viii) the establishment

of center to assist SMEs, and (ix) some other supplementary solutions.
In addition, Chapter 3 presents some important recommendations for
the Government, the State Bank of Vietnam, and the Vietnamese SME
Association to ensure that the above solutions are implemented
systematically and consitently so that the intended results could be
achieved effectively.

21

CONCLUSION

In the recent years, the Vietnamese SMEs have taken part in most of
industries of the economy nationwide and have firmly established their vital
role in the development of the Vietnamese economy as they account for
about 98% of the nation’s enterprises, contribute approximately to 40% of
GDP, and create about one million of new jobs every year. However, they
have been the most vulnerable sector when the country had to face with
macroeconomic instabilities, especially since 2008 as the economy went into
the continuous spiral of instability and recession, of high inflation and low
economic growth, making aggregate demand drop sharply, inventories
increase to high levels, and investments for business suffer from severe
shortages, etc. Facing with decreasing revenues and profits, SMEs who
inherently depend on borrowing capital to operate have had increasingly
serious difficulties in gaining access to bank credit. Series of SMEs have
been forced to cease production, even to go bankrupt in recent years.
Because of the paramount importance of SMEs to the domestic economy, it
is crucial to support the recovery and development of SMEs in order to
recover the whole economy to its previous stable growth path. Of all the
supporting policies for SMEs, the credit policy plays a very important role
because of the peculiarity of a bank-based market of Vietnam.

Meanwhile, when most of Vietnamese commercial banks are following
the model of retail banking, the segment of SMEs has been defined as their
target customers in the years to come. In reality, credit to SMEs has been
contributing greatly to the growth of the banking system in the recent years.
However, because of the instabilities of the macroeconomy, the commercial
banks’ credit supply to SMEs has been experiencing several difficulties.
Hence, it is necessary to have researches into the growth of bank credit to
SMEs in the unstable macroeconomy conducted in order to promote the
development of the Vietnamese economy in general and of SMEs and
banking system in particular.
The dissertation “Bank credit to SMEs in the Vietnamese unstable
macroeconomy” focuses systematically on the theoretical as well as practical
issues of bank credit to SMEs in the unstable macroeconomy of Vietnam.
The main contributions of the dissertation are as follows.
Firstly, the dissertation presents the theoretical framework of bank
credit to SMEs, macroeconomic instabilities, bank credit to SMEs in the
22

unstable macroeconomy, and the factors that impact on the bank credit to
SMEs in the unstable macroeconomy. Moreover, it also draw a set of
valuable lessons for Vietnam in promoting bank credit to SMEs in the
unstable macroeconomy from the experiences of Taiwan, South Korea,
and Ireland.
Secondly, the dissertation analyses and evaluates comprehensively the
current situation of bank credit to SMEs in the unstable macroeconomy of
Vietnam. The analysis was conducted by using qualitative method as well as
quantitative method of empirical models to measure the effects of factors to
the ratio of bank credit to total capital of SMEs. Subsequently, the
dissertation draws several objective evaluations of the success, limitations,
and causes of the limitations of the bank credit to SMEs in the Vietnamese

unstable macroeconomy.
Thirdly, based on the causes of the limitations of the bank credit to
SMEs in the Vietnamese unstable macroeconomy as well as on the
guidelines on bank credit to SMEs in Vietnam in the upcoming years, the
dissertation provides a set of solutions including three strategic and nine
specific solutions accompanied by some supplementary recommendations to
promote bank credit to SMEs in the unstable macroeconomy of Vietnam.
In summary, the dissertation has accomplished its proposed research
objectives. With this dissertation, I hope to contribute to the knowledge of bank
credit to SMEs in the Vietnamese unstable macroeconomy. However, because
of the limitation of data, some drawbacks are inevitable in implemeting this
dissertation. Moreover, because the macroeconomy in the near future is still
unstable and unpredictable, other researches on this topic can be conducted to
find the most suitable solutions to the updated macroeconomic developments in
order to keep up the growth of bank credit to SMEs. I hope to recieve the
feedbacks from other researchers to improve my dissertation and to broaden my
knowledge in this research field.
23

LIST OF RELATED RESEARCH PROJECTS
PULISHED BY AUTHOR


1. Nguyen Van Le (2014), Bank credit growth to SMEs in unstable
maccroeconomy: international experiences and implications for Vietnam.
Journal of Banking. No 140+141 in Jan&Feb, 2014.
2. Nguyen Van Le (2014), Social Responsibility: Recognition of Vietnamese
commercial banks in 2012 – 2013. Journal of Banking. No 1+2 in Jan, 2014.
3. Member of industry level scientific research project 2012“Cross-
ownership in Vietnamese commercial banking system: Current status,

consequences and solutions”, defended at distinction level in Jan, 2014.
4. Nguyen Van Le (2013), Social responsibility of Vietnamese commercial
banks. Report “Overview of banking industry in 2013, Forecast and some
policy recommendations for 2014: Review of the restructurre of credit
institution system”. Banking Academy of Vietnam.